Thursday, December 12, 2002 - Page updated at 12:00 AM

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New Tablet, Media Center PCs sell slowly for Microsoft

Seattle Times technology reporter

Microsoft made a big splash this fall with new products that could change the way people use computers, but it seems all the publicity has not translated into big sales so far.

The company touted its Tablet PC as a machine to revolutionize laptop computing. The Media Center PC is aimed at making a computer an entertainment center, and the Xbox Live kit is moving video games online.

At the peak of the holiday-shopping season, however, the Tablet and Media Center computers are not flying off the shelves — in fact, they aren't even on some shelves.

The Xbox Live could be the most successful of the group so far, but it faces tough competition from Sony's PlayStation 2.

Why the slow start? No solid sales figures are publicly available, but it's clear computer makers don't expect the new PC products to be at the top of gift lists or corporate purchase orders. They're cautious until they get a sense of demand, analysts say.

For the consumer this season, that means no Tablet PCs from ViewSonic or Toshiba can be purchased on, or other online outlets. They haven't come in yet. They're not in such stores as the Circuit City in Bellevue, either.

As for the Media Center PC, only one of three versions of Hewlett-Packard's line is in retail stores. The others are available on the company's Web site.

It's the curse of the cutting edge, in some respects. Because these technologies are so new, no one is sure how buyers will respond.

"You want to hedge a little bit," said Andrew Leach, product-marketing manager with the HP group that oversees the company's version of the Tablet PC. "You don't want to do gangbusters out there on your supply side."

More than a dozen companies are making the Tablet PC, which recognizes text written with a special stylus and weighs less than 3 pounds. Models range from notepad-like "slates" to a more traditional laptop with built-in keyboard. Some models are still in the manufacturing stage.

Computer makers say they don't expect Tablet PCs, which generally cost more than $2,000 a unit, to be an immediate hit with shoppers. Instead, they are focusing on the business market.

"It's an expensive proposition to get something like that out to everybody in a lot of stores," said Stephen Baker, research director at the NPD Group research company. "It's a niche product, and it's tough for a mass retailer to stock and work with a product like that."

The Gartner research company estimates Tablet PC shipments could max at a disappointing 425,000 units next year as companies evaluate the technology. That's about 1.2 percent of worldwide notebook shipments.

"Nobody's making a big bet on them," said Gartner analyst Leslie Fiering.

The slow rollout strategy may have backfired in one way, however — among consumers who saw the technology and are ready to buy.

The few display models sent to stores were meant to create a buzz, said Alan Promisel, an analyst with the IDC research company. But that publicity turned into consumer interest, and Microsoft and some computer makers were unprepared, he said.

Computer makers "are now scurrying to fill the retail channel in order to take advantage of the unexpected demand," Promisel said.

Microsoft has created a Web site to show consumers where to buy Tablets, and product manager Kelly Berschauer said the company has tried to get display models in stores.

On the corporate-sales side, Berschauer said Microsoft has been discussing the Tablet with about 25 business customers since June.

HP spokesman Roger Frizzell said Tablet PC sales to business buyers are exceeding projections. He said the Tablet could follow the path of the handheld Pocket PC, which was marketed first to businesses and later to consumers.

Unlike the Tablet, the Media Center PC is targeted at consumers interested in digital music and other forms of entertainment. It comes with a remote control and can be used to watch and record television and listen to music.

HP was the first computer maker to produce the Media Center, and Gateway and Alienware recently released their own versions.

Analysts who have looked at sales figures say Media Center is beating expectations, but those weren't high in the first place.

Microsoft spokeswoman Jodie Cadieux said the company was "very realistic" about sales projections. "Like any new category, it takes a little while before the value is evidenced to mainstream consumers," she said.

The HP model available in stores is priced at $1,649, more than what mainstream computer shoppers will spend this season, said Toni Duboise, a desktop-PC analyst with the ARS research company. HP has two additional models available only on its Web site.

"I can't say that it's taken the market by storm," Duboise said. "I don't think that they're standing in line to get this machine, especially at $1,649."

Though Microsoft has not released sales figures for the Tablet or Media Center, it did announce early sales numbers for Xbox Live, perhaps because competitor Sony released similar figures for PlayStation 2.

Xbox Live, a subscription-based service, allows users to play video games with others connected over the Internet. Buying a $49.99 starter kit gives a player access to the service for a year. After that, there will likely be a monthly subscription fee in the $10 range.

About 150,000 starter kits were sold the week after the service's Nov. 15 launch. Microsoft estimated 200,000 players used the service then.

Sony said it expects to sell 400,000 of its online-access tools, called network adaptors, by Dec. 31. The $39.99 adaptor can be used with a dial-up Internet connection, although some Sony games are specifically for high-speed Internet play.

Drawing a few hundred thousand players to an online service is the easy part, said David Cole, an analyst with DFC Intelligence. The real challenge is attracting mainstream video-game users willing to pay for the online experience.

Sony's true lead is at the hardware level. Since it released PlayStation 2 in 2000 — a year before Xbox's debut — Sony has shipped 40 million units worldwide, including 17 million in North America.

By contrast, Microsoft at the end of June reported 3.9 million Xboxes had been shipped worldwide.

"Microsoft is placing a big emphasis on online games, thinking that will be a way for them to distinguish themselves from Sony," Cole said.

Kim Peterson: 206-464-2360 or


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